Date: 20030630
Docket: A-407-02
Citation: 2003FCA291
CORAM: STONE J.A.
BETWEEN:
APOTEX INC.
Appellant
(Plaintiff)
and
MERCK & CO. INC. and
MERCK FROSST CANADA INC.
Respondents
(Defendants)
Heard at Toronto, Ontario on May 14, 2003.
Judgment delivered at Ottawa, Ontario on June 30, 2003.
REASONS FOR JUDGMENT BY: SHARLOW J.A.
CONCURRED IN BY: STONE J.A.
EVANS J.A.
Date: 20030630
Docket: A-407-02
Citation: 2003FCA291
CORAM: STONE J.A.
BETWEEN:
APOTEX INC.
Appellant
(Plaintiff)
and
MERCK & CO. INC. and
MERCK FROSST CANADA INC.
Respondents
(Defendants)
REASONS FOR JUDGMENT
[1] This is the latest chapter in the legal saga concerning Canadian patent number 1,275,349 (the 349 patent) granted to Merck & Co., Inc. on October 16, 1990 under the Patent Act, R.S.C., 1985, c. P-4, and licensed to Merck Frosst Canada Inc. In this appeal, Apotex challenges certain infringement remedies awarded against it in Action No. T-294-96: Apotex Inc. v. Merck & Co. (2002), 19 C.P.R. (4th) 460 (F.C.T.D.).
Facts
[2] This matter has a long and complex litigation history, much of which is relevant to this appeal. I summarize the facts under three headings, (1) the 1991 action, (2) proceedings after the trial of the 1991 action, and (3) the 1996 action.
(1) The 1991 action
[3] The 349 patent relates to enalapril and enalapril maleate, said to be an ingredient of the drug called Vasotec. Merck & Co., Inc. and Merck Frosst Canada & Co. (collectively, Merck) have made and sold Vasotec in Canada.
[4] When the 349 patent was granted, the Patent Act contained a compulsory licensing regime for patented medicines. A Canadian manufacturer, Delmar Chemicals Inc., was granted a compulsory licence on April 24, 1992 to manufacture, use and sell enalapril maleate, with royalties payable to Merck.
[5] Delmar's licence was extinguished automatically on February 14, 1993, when the Patent Act was amended to abolish compulsory licensing. There was in existence at that time a quantity of licenced enalapril (that is, enalapril maleate that Delmar had manufactured while its licence was in effect). Delmar sold some of that licenced enalapril to an unidentified foreign party before its compulsory licence was extinguished.
[6] Apotex is a generic drug manufacturer. For a time, Apotex made and sold in Canada a generic version of Merck's product Vasotec. Merck took the position that those activities infringed the 349 patent.
[7] In 1991, Merck commenced an infringement action against Apotex (Action No. T-2408-91). Apotex defended the 1991 action on a number of grounds, and also counterclaimed for a declaration that certain claims of the 349 patent were invalid.
[8] The trial of the 1991 action was heard by MacKay J. in April and May of 1994. The result of the 1991 action was that the 349 patent was held to be valid and to have been infringed: Merck & Co. v. Apotex Inc., (1994), 59 C.P.R. (3d) 133 (F.C.T.D.). Reasons for judgment in the 1991 action were issued on December 14, 1994, and judgment was entered on December 22, 1994. Among the remedies granted to Merck was a permanent injunction in the following terms:
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3. The Defendant, by its officers, directors, servants, agents, employees, or otherwise, is hereby restrained and enjoined from infringing claims 1 to 5 and 8 to 15 inclusive of Canadian Letters Patent No. 1,275,349, and in particular from manufacturing, using, offering for sale and selling, in Canada or elsewhere, APO-ENALAPRIL tablets or any tablets or other dosage forms containing enalapril maleate as an active ingredient, whether such manufacture or sale be from (a) bulk enalapril or enalapril maleate acquired prior to the grant of the patent, or (b) any quantities of bulk enalapril maleate acquired after the grant of the patent. |
[9] Apotex appealed to this Court, and succeeded in part: Merck & Co. v. Apotex Inc. (C.A.), [1995] 2 F.C. 723. Section 56 of the Patent Act was held to protect Apotex from liability for infringement with respect to certain enalapril maleate. The terms of the permanent injunction were amended to read as follows (from the April 19, 1995 judgment of this Court, emphasis added):
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3. The Defendant, by its officers, directors, servants, agents, employees, or otherwise, is hereby restrained and enjoined from infringing claims 1 to 5 and 8 to 15 inclusive of Canadian Letters Patent No. 1,275,349, and in particular from manufacturing, using, offering for sale and selling, in Canada or elsewhere, APO-ENALAPRIL tablets or any tablets or other dosage forms containing enalapril maleate as an active ingredient, manufactured from bulk enalapril maleate contained in lots P-65478, P-65479 and P-65480 as well as from the 44.9 kilograms of enalapril maleate referred to in paragraph 1 hereof . |
The remainder of the trial decision was upheld, including the finding of infringement with respect to 44.9 kg of licenced enalapril that Apotex had purchased in March of 1993 from the unnamed foreign party that acquired it from Delmar prior to the extinguishment of its compulsory licence.
[10] The April 19, 1995 judgment of this Court was further amended on May 16, 1995, but no other changes were made to the permanent injunction quoted above. Leave to appeal to the Supreme Court of Canada was denied: [1995] S.C.C.A. No. 253 (QL).
[11] In 1996, Merck moved to reconsider the judgment to add a reference to certain bulk enalapril that had not been dealt with at trial. That motion was dismissed: Apotex Inc. v. Merck & Co. Inc. (1996), 66 C.P.R. (3d) 167 (F.C.A.) motions. However, Stone J.A., writing for the Court, said this about the scope of the permanent injunction:
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Paragraph 3 of the trial judgment as amended by this court's judgment of April 19, 1995, broadly restrains and enjoins the appellant "from infringing claims 1 to 5 and 8 through 15 inclusive of Canadian Letters Patent 1,275,349". The phrase in that paragraph beginning with the words "and in particular" does not in any way cut down the broad scope of the injunction granted in the opening words of the paragraph.
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[12] After the trial of the 1991 action, Apotex sold or had some involvement in selling enalapril tablets that had been part of its inventory. Those transactions were found to breach the permanent injunction. Apotex and one of its officers were found to be in contempt of court, and were penalized: Merck & Co. v. Apotex Inc. (2000), 5 C.P.R. (4th) 1 (F.C.T.D.) and (2001), 12 C.P.R. (4th) 456 (F.C.T.D.). Apotex and the officer appealed. Merck cross-appealed. The appeal by Apotex has now been allowed in part, and the cross appeal has been dismissed: 2003 FCA 234.
(2) Proceedings after the trial of the 1991 action
[13] In May and October of 1994 (that is, after the trial of the 1991 action but before judgment), Apotex purchased 772.9 kg of licenced enalapril from the unidentified foreign party that had acquired it from Delmar prior to the extinguishment of the compulsory licence. I will refer to that licenced enalapril as the "1994 enalapril". At the trial of the 1991 action, there was no evidence relating to the 1994 enalapril. That is not surprising, because Apotex acquired the 1994 enalapril after the completion of the trial.
[14] In 1994 or 1995, when Merck began to suspect that Apotex may have acquired enalapril after the trial of the 1991 action, it tried by various means to bring post-trial acquisitions within the scope of the remedies obtained in the 1991 action. It did not succeed. No useful purpose would be served by providing details of the many steps taken in this regard. They can be discovered through a review of the reported cases, including Merck & Co. v. Apotex Inc., (1995), 64 C.P.R. (3d) 456 (F.C.T.D.); (1996), 67 C.P.R. (3d) 463 (F.C.T.D.); [1997] F.C.J. No. 1852 (T.D.)(QL); (1997), 77 C.P.R. (3d) 541 (F.C.T.D.); (1998), 78 C.P.R. (3d) 376 (F.C.T.D.) (upheld on appeal: [1999] F.C.J. No. 2022 (C.A.)(QL), leave to appeal dismissed, [2000] S.C.C.A. No. 79); (1998), 84 C.P.R. (3d) 172 (F.C.T.D.).
(3) The 1996 action
[15] In 1996, Apotex commenced a new action (Action No. T-294-96) to seek a declaration that the manufacture and sale of enalapril tablets from licensed enalapril acquired after the trial of the 1991 action would not infringe the 349 patent. Merck defended the claim and, upon obtaining leave, added a counterclaim to seek a declaration of infringement in relation to the enalapril referred to in the statement of claim.
[16] Apotex filed a defence to the counterclaim to allege invalidity of the 349 patent. Those allegations were struck on the basis that the validity of the patent had been conclusively determined in the 1991 action: Apotex Inc. v. Merck & Co., [1999] F.C.J. No. 1706 (T.D.)(QL), affirmed on appeal, [2000] F.C.J. No. 1909 (C.A.)(QL).
[17] In the 1996 action, both parties brought motions for summary judgment on the issue of infringement. The evidence filed in the summary judgment motions included evidence of the acquisition of the 1994 enalapril. There was no evidence that Apotex had acquired any other enalapril after the trial of the 1991 action.
[18] The motions judge dismissed the summary judgment motion of Apotex and allowed the summary judgment motion of Merck on the basis of the doctrine of res judicata: Apotex Inc. v. Merck & Co. (2001), 11 C.P.R. (4th) 38 (F.C.T.D.). He found the facts to be indistinguishable from the facts in the 1991 action, and he rejected the argument of Apotex that Eli Lilly and Co. v. Novopharm Ltd.; Eli Lilly & Co. v. Apotex Inc., [1998] 2 S.C.R. 129, had changed the law to the degree that the doctrine of res judicata should not apply.
[19] The summary judgment was upheld on appeal: Apotex Inc. v. Merck & Co. (C.A.), [2003] 1 F.C. 242, 19 C.P.R. (4th) 163 (F.C.A.). Leave to appeal to the Supreme Court of Canada was denied: Apotex Inc. v. Merck & Co. , [2002] S.C.C.A. No. 323.
[20] Following the summary judgment decision, the motions judge ordered the matter of remedy to be dealt with at a subsequent hearing. On Merck's motion, the motions judge made the following order:
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1. A declaration is issued that Apotex has infringed claims 1 to 5 and 8 to 15 of the '349 patent in respect of its manufacture, offering for sale and/or sale of enalapril maleate tablets made from bulk enalapril maleate and enalapril containing compounds manufactured subsequent to October 16, 1990, the date of issue of the '349 patent and acquired by Apotex subsequent to the trial of Action No. T-2408-91, held March and April, 1994, including, but without being limited to, enalapril maleate tablets made from a quantity of at least 772.1 kgs of bulk enalapril maleate acquired by Apotex subsequent to the trial of Action No. T-2408-91. |
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2. Apotex shall deliver up or destroy under oath or under supervision of this Court all remaining enalapril maleate containing compounds in bulk or dosage form in the possession or control of Apotex that infringes the '349 patent, as aforesaid. |
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3. Merck shall be entitled to their damages or to take an accounting of profits made by Apotex, as Merck may by due enquiry elect, for all acts of infringement by Apotex following due enquiry on a reference. |
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4. Merck shall be entitled to exemplary or punitive damages for the knowing and wilful breach of the permanent injunction of this Court, and the quantum to be awarded, if any, is to be determined by this Court following a reference. |
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5. Apotex shall pay to Merck, pre-judgment and post-judgment interest on such damages or profits. |
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6. Merck shall be entitled to their costs of this motion on the Tariff B, Column III scale. |
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7. There shall be a reference pursuant to Rules 216 and 153 for the purpose of making an inquiry and report including determining the following issues of fact: |
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(a) the extent of infringement of the rights of Merck by all acts of infringement of claims 1 to 5 and 8 to 15 of the '349 patent, including the manufacture, use, offering for sale and/or sale of dosage form tablets made using enalapril maleate and enalapril containing compounds manufactured subsequent to October 16, 1990, the date of issue of the '349 patent and acquired by Apotex subsequent to the trial of Action No. T-2408-91, held March and April, 1994, including, in particular, but without being limited to, dosage form tablets made from a quantity of at least 772.1 kg of bulk enalapril maleate acquired by Apotex subsequent to the trial of Action No. T-2408-91 and sold by Apotex including under the trade names Apo-enalapril and Apo-enalap; |
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(b) a disclosure of all quantities of enalapril maleate and enalapril containing compounds acquired by Apotex, all quantities of dosage form tablets made by Apotex from enalapril maleate and enalapril containing compounds, all quantities or dosage form tablets offered for sale or sold by Apotex including under the trade names Apo-enalapril and Apo-enalap, all in infringement of the rights of Merck as particularized in part 7(a) hereof; |
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(c) an accounting of the profits of Apotex or, in the alternative, the damages suffered by Merck, as Merck may elect, arising from infringement of Apotex's rights by all acts of infringement by Apotex of claims 1 to 5 and 8 to 15 of the '349 patent, as particularized in parts 7(a) and (b) hereof, including profits from the use of Apotex's profits in intercorporate loans; |
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(d) pre-judgment interest, and the rate, relevant date and manner in which pre-judgment interest is to be applied, on such profits or damages, as Merck may elect; |
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(e) post-judgment interest, and the rate, relevant date and manner in which post-judgment interest is to be applied, on such profits or damages, as Merck may elect; |
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(f) the quantum of punitive or exemplary damages to be imposed on Apotex as appropriate in the circumstances; and |
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(g) any questions of fact as to parts 7(a) and (f) hereof. |
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8. The schedule for the conduct of pre-hearing steps on the reference is as follows: |
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(a) production by Apotex of a complete and accurate Supplementary Affidavit of Documents in the form prescribed under Rule 223(2), including supplementing and correcting deficiencies in the Amended Affidavit of Documents sworn October 1, 1996, and in Schedules I, II, III and IV thereto, and disclosing all documents and records relevant to issues identified in paragraph 3 aforesaid, within thirty days from the date of this Order. |
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(b) production by Apotex for inspection and copying of all relevant documents and records as particularized in paragraph 8(a), in paper on computer readable medium and electronic form, within thirty days from the date of the Supplementary Affidavit of Documents, current to the date of production, including documents and records subsequent to October 1, 1996, in relation to: |
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(i) the quantities and purchase price of all enalapril maleate and enalapril containing compounds manufactured subsequent to October 16, 1990, the date of grant of the '349 patent and acquired by Apotex subsequent to the trial of Action No. T-2408-91, heard March and April 1994, including, but not limited to quantities originating from Delmar Chemicals Ltd.; |
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(ii) the manufacture of all quantities of dosage form tablets, including Apo-enalapril and Apo-enalap tablets, manufactured by Apotex from all enalapril maleate and enalapril containing compounds identified in paragraph 8(b)(i) hereof, including records required to be maintained under Division 2 - Good Manufacturing Practices - Food and Drug Regulations, C.R.C. c. 870, as amended, particularly, sections C.02.009, C.02.010, C.02.012, C.02.014, C.02.016, C.02.017, C.02.018, C.02.019, C.02.020, C.02.021, and C.02.022; |
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(iii) the sale, invoicing, transfer, inventory or shipping of material identified in parts 8(b)(i) and (b)(ii), including exported material and documentation therefore; |
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(iv) the expenses, if any, that may be claimed by Apotex to be charged against the acquisition of bulk enalapril maleate and enalapril containing compounds and the manufacture and sale of dosage form tablets therefrom, all as identified in parts 8(b)(i) and (ii); |
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(v) the profits earned by Apotex from the acquisition of enalapril maleate and enalapril containing compounds and the manufacture and sale of dosage form tablets therefrom, all as identified in parts 8(b)(i) and (ii); |
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(vi) the quantities and regular selling price of any such dosage form tablets made from enalapril maleate and enalapril containing compounds that Apotex delivered to customers or prospective customers by way of free samples, volume credits and the like, for which no selling price or reduced selling price was charged; |
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(vii) the knowledge by Apotex of the permanent injunction identified in the Reasons for Judgment of December 14, 1994 and in the formal Judgment of the Court dated December 22, 1994, T-2408-91, as affirmed by the Court of Appeal on April 19, 1995 and May 16, 1995 in A-724-95; |
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(viii) the decision by Apotex to manufacture and sell dosage form tablets from enalapril maleate and enalapril containing compounds in contravention of the permanent injunction identified in part 8(b)(vii), up to and including the decision to commence the action by Statement of Claim in the within action; |
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(ix) all benefits, financial or otherwise, accruing to Apotex as a result of its actions in contravention of the permanent injunction identified in part 8(b)(vii) hereof including its use of revenues obtaining in breach of the injunction, its growth in market presence, its expansion of its facilities, the use of the revenues to finance acquisition or increased ownership of sister companies or other related companies, including Torpharm Inc. and Barr Laboratories, and other derivative benefits; |
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(x) factors relevant to assessing an appropriate quantum of punitive or exemplary damages, including for 1994, 1995 and 1996, the assets of Apotex, annual revenues, revenues relating to dosage form tablets from enalapril maleate and enalapril containing compounds, and concealment of its actions; |
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(c) Apotex shall produce for examination for discovery, an officer or other acceptable corporate nominee commencing within sixty days following receipt by Merck of Apotex's documents under part 8(b) hereof and continuing until the discovery is completed or adjourned by agreement or Court Order; |
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(d) following completion of the examination for discovery of Apotex and prior to the examination for discovery, if any, of Merck, Merck shall elect as between their damages and an accounting of Apotex's profits, such election will be made within thirty days of completion of the discovery of Apotex; |
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(e) in the event Merck elects an account of Apotex's profits, there will be no examination for discovery or discovery of documents of Merck; |
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(f) if Merck elect to recover their damages, there will be production of documents by Merck in accordance with the Rules, in respect of the damages claimed to be suffered by Merck as a result of Apotex's infringing activities, within sixty days of the date of their election; |
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(g) Apotex shall examine for discovery an officer or other acceptable corporate nominee of each of Merck in respect of their damage claim, commencing within sixty days following receive of Merck's documents and continuing until the discovery is completed or adjourned by agreement or Court Order to a future date and place; |
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(h) the parties shall, within thirty days following the completion of discovery phase of the reference, exchange written pleadings stating that the issues to be decided on the reference and their respective pleadings with respect to the issues, which must comply with the Rules on pleadings; |
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(i) a hearing officer of the Federal Court of Canada may be nominated as the person to act as the Referee on the reference and to dispose of any motions or issues arising prior to the hearing of the reference as the parties may elect to bring before said Hearing Officer; |
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(j) the parties through their counsel, may consent to any changes to the dates and times set out herein or, failing consent, by Order of the Court; |
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(k) the parties may apply to the court at any time prior to the date fixed for the hearing of the reference for an order requiring a party to produce documents and be examined for discovery on any issue arising during the course of discoveries on the reference, for the purpose of adjudication of such issue by the Court or referee on the reference; |
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(l) the Court may make such order and give such direction as necessary for the determination of any issue, including findings of fact, relevant to the conduct, scope and expeditious resolution of the reference in advance of the date fixed for the hearing of the reference. |
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(m) Merck may apply to the Court at any time for an order fixing a date for the hearing of the reference at Ottawa, Ontario; and |
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(n) any documents and any portions of the examinations for discovery may be designated to be under the Protective Order dated September 3, 1996 in this case, in accordance with the provisions of that Order. |
[21] Apotex appealed the order. That is the appeal now before this Court.
Issues on appeal
[22] There are four issues on the appeal: (1) whether it was appropriate for the motions judge to determine the question of remedy as a summary judgment, (2) whether the scope of the declaration of infringement is too broad, (3) whether the remedy phase as designed by the motions judge unfairly deprives Apotex of a right of discovery, and (4) whether the motions judge erred in his treatment of punitive damages. I will deal with the issues in that order.
(1) Summary judgment
[23] This case presents an unusual situation that arose because the merits of the infringement claim were dealt with by way of summary judgment motions by both parties. The summary judgment motions resulted in a de facto bifurcation between the liability and remedy phases, but no steps were taken formally to defer examinations for discovery on remedy, which is a routine step in bifurcated proceedings. As neither party had conducted examinations for discovery on remedy before making their summary judgment motion, the parties found themselves in dispute on the appropriate procedure for the remedy phase.
[24] The motions judge, faced with this situation, was entitled to design a unique procedure for dealing with matters of remedy. He chose summary judgment, supplemented with a reference with lengthy terms of reference, as a solution. I see nothing wrong in principle with that approach, provided the chosen procedure safeguarded the rights of both parties.
[25] In my view it was appropriate in the remedy phase of this case to deal with many of the issues by way of summary judgment. For example, the entitlement of Merck to a declaration of infringement is well established on the evidence and, subject to the comments below on the scope of the declaration, there is no issue relevant to Merck's entitlement to a declaration that requires a trial. However, Apotex has valid objections to other parts of the order; those issues are discussed below.
(2) The scope of the declaration of infringement
[26] Apotex argues that the declaration is overly broad because it purports to refer to enalapril maleate tablets other than those made from the 772.1 kg. of licensed enalapril that Apotex acquired in 1994 from the unidentified foreign party. This is the same argument that precluded Merck from including references to post-trial transactions in the remedies relating to the 1991 action. It is suggested on various grounds that Apotex may have or may acquire enalapril even now without infringing the 349 patent. For example, it could have experimental quantities that are protected from infringement actions by subsection 55.2(1) of the Patent Act.
[27] Given that infringement has been proven, that Apotex has also been found to be in contempt of court for breaching the permanent injunction, and that Apotex has consistently taken the narrowest possible view of its disclosure obligations, it would appear to me unfair to Merck to reduce the scope of the declaration at this stage to deal with the mere possibility that Apotex may have or may acquire enalapril without infringing the 349 patent. However, because that possibility does exist, Apotex should be at liberty to establish, in the reference proceedings, that specific acts or the ownership of specific quantities of enalapril or enalapril maleate are non-infringing. The terms of the judgment should be amended accordingly (refer to "Conclusions", below).
(3) Whether Apotex has been deprived unfairly of a right of discovery on remedy
[28] Apotex has been found to have infringed Merck's patent, and Merck is entitled to an award of damages if damages can be proved. If Merck were content with damages, Apotex would be entitled to discoveries in relation to damages and there would be no need for Merck to conduct any discoveries of Apotex.
[29] But Merck also has the right to ask for an alternative remedy in the form of an accounting of the profits of Apotex from the infringing activities, and has indicated that it wishes to consider exercising that right. It is reasonable to permit Merck to discover Apotex on issues relating to its profits before Merck makes that request.
[30] The accounting remedy generally is more onerous to the infringing party than an award of damages, because it is intended to do more than merely compensate the patent holder for its loss. It is an equitable remedy, and not an automatic entitlement: Consolboard Inc. v. Macmillan Bloedel (Saskatchewan) Ltd., [1981] 1 S.C.R. 504, 56 C.P.R. (2d) 145. As a matter of fairness, the accounting remedy should not be granted over the objection of the infringing party unless that party is first given a reasonable opportunity to argue that equity should preclude the accounting remedy.
[31] In this case, Apotex wishes to avail itself of the right to make submissions on the matter of Merck's election, but the right is a hollow one if Apotex cannot obtain relevant evidence from Merck. If this case had proceeded in the normal way, without bifurcation, Apotex would have been entitled to the normal discovery process to attempt to uncover such evidence. But because of the shortcuts desired by both parties, the process of discovery did not even begin.
[32] There is considerable force in the argument that if Merck wishes to keep its options open, Apotex should also be entitled to search for evidence to defend itself against an accounting award. However, the motions judge did not give Apotex that right because, in the 1991 action, Merck was held to be entitled to make the election, and the motions judge could not discern any change in the facts relevant to that entitlement.
[33] I respectfully disagree with the motions judge on this point. I am unable to see how the motions judge could determine that the facts relating to entitlement have not changed, when Apotex has not yet had an opportunity to discover evidence of those facts. In my view, the motions judge erred in permitting Merck to make its election after discovering Apotex, without first permitting Apotex to discover Merck on issues of remedy so that it could make appropriate submissions on whether Merck should be entitled to make the election. This error can be corrected by an appropriate amendment to the judgment (refer to "Conclusions", below).
(4) Punitive damages
[34] Punitive damages are awarded for conduct that is "high-handed, malicious, arbitrary, or highly reprehensible conduct that departs to a marked degree from ordinary standards of decent behaviour" (Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595, at paragraph 94). The purpose of punitive damages is to punish, to deter the wrongdoer and others, and to denounce wrongful behaviour. Punitive damages are awarded only where compensatory damages and other normal civil remedies are insufficient to accomplish those objectives, and in an amount that is no greater than necessary to accomplish that objective: Whiten, supra; Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130. It is axiomatic that until all the ordinary civil remedies are finally determined (which in this case would include a determination as to whether the remedy is an award of damages or an accounting of profits, and the quantum), it is impossible to determine whether punitive damages are required to meet the objectives of punishment, deterrence and denunciation.
[35] In my view, the motions judge erred in deciding, before the other remedies are determined, that Apotex is liable for punitive damages. There is also a certain ambiguity in the judgment of the motions judge on the question of whether the referee was to be empowered to grant punitive damages, or merely to quantify them. Either way, the matter of punitive damages seems to me to be an inappropriate subject for a reference. These errors can be corrected by an appropriate amendment to the judgment (refer to "Conclusions", below).
[36] Apotex also disputes whether the conduct of Apotex justifies an award of punitive damages. The motions judge characterizing the conduct of Apotex as a "knowing and wilful breach of the injunction" or a "deliberate and flagrant breach of the injunction". As the matter of punitive damages must remain an open question for the present, I will not express an opinion on this point. I will say, however, that the motions judge may have been unduly influenced by his conclusion that, throughout the post-trial motions and appeals relating to the 1991 action, Apotex did not disclose its acquisition of the 1994 enalapril. As indicated above, it seems to me reasonable to take that non-disclosure into account in granting a declaration that refers to more than just the 1994 enalapril. However, a closer look at that non-disclosure should be undertaken before it is permitted to influence the decision about punitive damages.
[37] The 1994 acquisition itself, of course, is relevant to any proceedings alleging breach of the permanent injunction that was one of the remedies awarded in the 1991 action. If there was ever a doubt about that, it was resolved by the comments of Stone J.A. quoted above. I would note also that, while it is not clear exactly when Merck learned of the 1994 acquisition, Merck took steps in January of 1999 to enforce the permanent injunction in connection with that acquisition. It did so by seeking leave to amend its defence in the 1996 action and to add a counterclaim for damages for breach of the injunction: Apotex Inc. v. Merck & Co., [1999] F.C.J. No. 296 (F.C.T.D.)(QL).
Conclusion
[38] The appeal should be allowed in part and the matter remitted to the Trial Division for continuance of the trial on the issues that remain to be determined in light of the judgment on this appeal. The order of the Trial Division dated May 31, 2002 should be varied to read as follows:
(a) paragraph 1 of the order should be deleted and the following substituted:
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1. A declaration is issued that Apotex has infringed claims 1 to 5 and 8 to 15 of the '349 patent in respect of its manufacture, offering for sale and/or sale of enalapril maleate tablets made from bulk enalapril maleate and enalapril containing compounds manufactured subsequent to October 16, 1990, the date of issue of the '349 patent and acquired by Apotex subsequent to the trial of Action No. T-2408-91, held March and April, 1994. For greater certainty, this declaration: |
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(a) applies to enalapril maleate tablets made from a quantity of at least 772.1 kgs of bulk enalapril maleate acquired by Apotex subsequent to the trial of Action No. T-2408-91 and any other enalapril maleate tablets made from bulk enalapril maleate acquired by Apotex subsequent to the trial of Action No. T-2408-91; |
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(b) does not apply to enalapril or enalapril maleate that Apotex establishes to the satisfaction of Merck, or the Court in the case of dispute, that it is entitled to retain or acquire because of a provision of the Patent Act, including section 55.2 or section 66.
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(b) The remainder of the May 31, 2002 order should be struck, except for paragraph 2 and paragraph 6.
[39] Upon the continuation of the trial, the procedure for the remedy phase should conform to the following guidelines.
[40] First, if Merck wishes to keep open the possibility that it will ask for an accounting in lieu of damages, both parties should be entitled to examinations for discovery on issues relating to remedy. They should then be entitled to be heard on the question of whether or not Merck should be permitted to make the election.
[41] Second, the decision as to whether or not Merck is permitted to make the election is for a judge, not a referee. However, once the decision as to the election is made, a reference may be ordered to determine the quantum of damages or the accounting, as the case may be.
[42] Third, the matter of punitive damages should not be considered until after all other remedies are determined, and then the judge and not a referee should determine whether punitive damages ought to be awarded, and the quantum.
[43] Fourth, as there has been no appeal in relation to the portions of the May 31, 2002 order that deal with pre-judgment interest and post-judgment interest, any new order by the Trial Division should incorporate what now appears in paragraph 5, paragraph 7(d) and paragraph (e) of the May 31, 2002 order.
[44] As Apotex has not asked for costs of this appeal, none should be awarded.
(s) "K. Sharlow"
J.A.
I agree
"A.J. Stone"
J.A.
I agree
"John M. Evans"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-407-02
STYLE OF CAUSE: APOTEX INC. v. MERCK & CO. INC and MERCK FROSST CANADA INC.
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: MONDAY, MAY 14, 2003
REASONS FOR JUDGMENT : Sharlow J.A.
CONCURRED IN BY: Stone and Evans J.J.A.
DATED: June 30, 2003
APPEARANCES:
Mr. H.B. Radomski FOR THE APPELLANT
Ms. Nancy DeLuca
Mr. G. Alexander Macklin FOR THE RESPONDENTS
Ms. Hélène D'Iorio
SOLICITORS OF RECORD:
Goodmans LLP FOR THE APPELLANT
Toronto, Ontario
Gowling LaFleur Henderson LLP FOR THE RESPONDENTS
Ottawa, Ontario